Falcone Leaves LightSquared Board Amid Bankruptcy Talks

June 19 (Bloomberg) -- Philip Falcone resigned from the
board of LightSquared Inc., the bankrupt wireless-spectrum owner
he has tried to build into a rival to U.S. mobile providers,
amid negotiations with creditors to reorganize the company.

Falcone and four other people appointed to the board by his
Harbinger Capital Partners voluntarily resigned on June 12,
according to a letter filed with the Federal Communications
Commission and posted on the agency’s website.

Falcone, 51, had been fighting to keep control of the
company throughout its two years in bankruptcy. At one point,
Dish Network Corp. Chairman Charles Ergen made a $2.22 billion
offer for its assets, only to withdraw the bid at the last
minute. Falcone accused Ergen of acquiring LightSquared debt
improperly to game the bankruptcy process.

U.S. Bankruptcy Judge Shelley Chapman rejected a Falcone-backed reorganization plan in May, saying it was largely unfair
to Ergen, while she also faulted Ergen’s behavior during the
case. Since then, LightSquared and its creditors have entered
court-supervised mediation to work out a new plan.

Mediation Progress

Falcone’s departure is probably a sign of progress in the
mediation, said Erik Gordon, a professor at the University of
Michigan’s business and law schools.

“This definitely increases the chances of mediation being
successful,” Gordon said in a phone interview yesterday. He
said Falcone’s posture “has been an impediment for getting much
done in the case so far.”

At the time Chapman sent the parties into mediation last
month, a lawyer for an independent committee said there was a
tentative plan for the company that would involve a third-party
investor offering new capital.

In addition to $2.9 billion of assets contributed by
Harbinger Capital Partners and affiliates, LightSquared has more
than $2.3 billion in debt and equity financing, according to the
company’s website.

LightSquared, based in Reston, Virginia, filed for
bankruptcy in 2012 after the FCC blocked its proposed service to
mobile devices over concerns about interference with GPS
navigation gear.

The company proposed using a combination of satellites and
ground-based towers to offer a national, wholesale high-speed
mobile data service. Its chairman and chief executive officer is
Douglas Smith, who was promoted in August 2012 as the company
said it would overcome the regulatory impasse. He had served as
LightSquared’s co-chief operating officer and helped design its
high-speed network.

The case is In re LightSquared Inc., 12-bk-12080, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).